May 9, 2013 in Business

Freddie Mac posts profit

Mortgage packager nets $4.6 billion for quarter, will pay Treasury $7 billion
Marcy Gordon Associated Press
 

WASHINGTON – Mortgage giant Freddie Mac earned $4.6 billion from January through March, helped by a stronger housing market. The government-controlled company has turned a profit in the past six quarters.

Freddie said Wednesday that it will pay a dividend of $7 billion to the U.S. Treasury next month and requested no additional federal aid for the fourth consecutive quarter.

The earnings compared with net income of $577 million in the first quarter of 2012.

The government rescued Freddie and larger sibling Fannie Mae during the financial crisis after both incurred massive losses on risky mortgages. The companies received loans of about $170 billion, the costliest bailout of the crisis. So far, the companies have repaid a combined $62.2 billion.

The companies are benefiting from a housing recovery that began a year ago. Record-low mortgage rates and slow but steady job growth have helped bring buyers back to the market. Home sales and construction have increased. And home prices are rising at the fastest pace in six years, driven by higher demand and a limited supply of homes for sale.

For Fannie and Freddie, a better housing market means fewer delinquent loans on their books. The improvement has also allowed the companies to charge mortgage lenders higher fees to guarantee the loans.

Under a federal policy adopted last summer, Fannie and Freddie must turn over any quarterly profits to the government.

Freddie, based in McLean, Va., earned $11 billion last year and paid $7.2 billion in dividends to the U.S. Treasury. It requested no government aid in the second, third and fourth quarters last year.

Fannie, based in Washington, reported last month that it earned $17.2 billion last year and said it expects to stay profitable for “the foreseeable future.” It also paid $11.6 billion in dividends to the U.S. Treasury in 2012. Last year was also Fannie’s first since its takeover by the government in 2008 that it asked for no federal aid.

Fannie and Freddie don’t directly make loans. Rather, they buy mortgages from lenders, package them as bonds, guarantee them against default and sell them to investors. In doing so, they help make loans available and exert influence over the housing market.

© Copyright 2013 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

Get stories like this in a free daily email


Please keep it civil. Don't post comments that are obscene, defamatory, threatening, off-topic, an infringement of copyright or an invasion of privacy. Read our forum standards and community guidelines.

You must be logged in to post comments. Please log in here or click the comment box below for options.

comments powered by Disqus